Bangladesh seeks to renegotiate the Adani power deal unless the court cancels it

Bangladesh is seeking to significantly reduce the prices under its power purchase agreement with India's Adani Group, unless the deal is annulled by a court. The court has called for an investigation into the 25-year agreement, according to the country's de facto energy minister in an interview with Reuters on Sunday.

Adani Group founder Gautam Adani is currently facing allegations from U.S. authorities regarding his involvement in a $265 million bribery scheme in India, charges he has denied. This comes as one Indian state reviews its power agreement with the group, while France's TotalEnergies has paused its investments.

In Bangladesh, following a lawyer's petition to potentially cancel the power deal, the High Court last week directed a committee of experts to review the contract under which Adani supplies power from a $2 billion coal-fired plant in eastern India. The investigation is expected to conclude by February, with the court's decision to follow. The deal, signed in 2017 between Adani and a government entity under Prime Minister Sheikh Hasina, began last year, with the 1,600-megawatt plant, which uses costly imported coal, providing about 10% of Bangladesh’s power consumption.

"Renegotiate in case of anomalies in the contract. Cancel only in case of irregularities such as corruption and bribery," said Muhammad Fouzul Kabir Khan, Bangladesh’s power and energy adviser, in an interview. "Both based on the findings of the court-ordered investigations."

Khan noted that issues such as Bangladesh not benefiting from Indian tax exemptions for the power plant have already been raised with Adani and could form part of a renegotiation. Adani did not respond immediately to a request for comment. In its latest annual report, Adani Power stated that the plant would provide Bangladesh with reliable and affordable electricity, lowering the average cost for consumers.

Khan mentioned that the U.S. corruption allegations against Adani might not directly impact the deal in Bangladesh.

A separate committee set up by Bangladesh's interim government is already investigating the Adani deal and six other power contracts to ensure that the investigations are acceptable in international negotiations and arbitration, according to a government statement.

Adani charged the highest rate for Indian-generated power to Bangladesh in the 2022/23 fiscal year at 14.02 taka per unit, compared to the average price of 8.77 taka ($0.0737), according to the state-run Bangladesh Power Development Board. The rate dropped to 12 taka per unit in 2023/24, still 27% higher than rates from other private Indian producers and 63% more than state-owned plants.

The retail price in Bangladesh is 8.95 taka per unit, leading to an annual power subsidy bill of 320 billion taka, Khan said. "Because the prices are high, the government has to subsidize," he added. "We would like power prices, not only from Adani, to come down below the average retail prices."

Despite the price concerns, Bangladesh will continue paying for the power it imports from Adani, though the company had recently reduced its supply by half due to payment delays.

Khan emphasized that Bangladesh has sufficient domestic capacity to meet its needs, even though some plants are underperforming due to gas shortages or other issues. "When Adani cut their supply to half, nothing happened," he said. "We will not allow any power producer to blackmail us."